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Morning markets: wheat revives but soy dips, as US data loom

So just exactly how many orders of US soybeans have Chinese buyers cancelled?

There has been no confirmation yet that Chinese importers have indeed ditched purchases from the US, switching their spending to Brazil, whose new crop shipments are now beginning in earnest now that the harvest is approaching second gear.

That said, some insight may come later on Thursday when the US Department of Agriculture unveils weekly export sales data.

"Trade is looking for cancellations in the weekly export sales, and a distinct possibly of net negative old crop sales," meaning cancellations exceed new orders, Kim Rugel at Benson Quinn Commodities said.

"The Brazilian producer has become an active seller in recent days with harvest now picking up steam and a weaker real currency supporting domestic values."

'Rumours of soybean cancellations…'

In fact, there was an unusually close consensus for estimates of the ditched orders. Does this make the talk more likely to be true?

CHS Hedging noted talk "throughout the trade that China has cancelled 10-15m bushels (272,000-408,000 tonnes) of US Gulf soybean shipments."

Another US broker highlighted "rumours that China called off 300,000-400,000 tonnes of U.S. soybeans purchases".

At Commonwealth Bank of Australia, Luke Mathews said that "there is market talk that up to 400,000 tonnes of US soybean sales to China have been switched to South American origin".

The rumours even reached Singapore, where Vanessa Tan at Phillip Futures noted "rumours of soybean cancellations by China of up to six cargoes", or potentially about 300,000 tonnes.

China sidelined

Whatever, the picture was hardly improved by the prospect on Friday of the start of China's lunar new year festivities, the country being the top importer of soybeans, besides of some other agricultural commodities such as cotton and rubber too.

"The Chinese Spring Festival starts on Friday and continues for about 23 days.  During this time many business and government offices will be closed," Ms Tan said.

"The slowdown in activity could mean a lack of fresh soybean purchases."

'Strong yields'

And when China does come back, there is of course the idea that buyers will turn to Brazil for supplies rather than the US.

"The early soybean harvest in Brazil has been met with good yields and is allowing earlier than normal exports as vessels begin to load at the port of Paranagua," CHS said, also flagging ideas of a potential Argentine export tax, as reported by, encouraging sales there too.

Ms Tan said: "In Brazil, it is likely that the already record-large soybeans crop harvest is expanding.

"The top soybean-growing region in Brazil, Mato Grosso, is experiencing strong yields."

Chicago soybeans for March dropped 0.4% to $12.63 ¾ a bushel as of 09:15 UK time (03:15 Chicago time), although that could well change depending on the weekly US export sales data later, expected to come in at 750,000-1.05m tonnes.

'Searching for value'

These statistics will be closely watched for wheat too, given less strong rumours of order cancellations, and with ideas of strong demand potentially able to stem the tide of selling in the grain.

Wheat markets "are back to searching for value, which requires additional export demand," Benson Quinn Commodities said.

Today's weekly export sales, "which are pegged 350,000- 550,000 tonnes, are not expected to do the trick in a market that the trade believes can invite more demand".

'Much of the news has been supportive'

In fact, the extent of the downturn in wheat prices has puzzled many analysts.

"Much of the news in recent weeks has been supportive, ie US freezes and improved demand, yet futures markets continue to break to fresh contract lows," CBA's Luke Mathews said.

Indeed, analyst Dave Hightower, on Wednesday forecast a bottom in the Chicago wheat market at $5.40-5.60 a bushel, not too far below current levels, while seeing corn prices potentially dropping to $3.60-3.85 a bushel.

Furthermore, the last session's tumble of more than 2% in wheat futures meant that "market are once again oversold", meaning that "potential sellers may approach the winter wheat markets with a little more caution", Benson Quinn Commodities said.

'Downtrend isn't over'

That said, "Wednesday's new lows and the fact that technical studies barely have a pulse indicate that the downtrend isn't over", the broker added.

And another negative for now is that the freeze in the US is waning.

"Cold temperatures have given way to more moderate temperatures, alleviating recent talk of winterkill," CHS said.

Wheat rebounded in early deals, but recovered only a portion of ground lost in the last session, adding 0.5% to $5.54 ½ a bushel in Chicago for March delivery.

'Limited selling'

Still, that allowed wheat to recover a little of the $0.10 a bushel in premium it lost in the last session over corn, which has proven more resilient thanks to ideas of firm demand – US exports are competitive on the world stage – and a reluctance by growers to sell.

Farmgate corn selling on Wednesday was "limited, unless driven by on farm quality issues", CHS said.

Still, many analysts believe the grain will nonetheless succumb eventually to the huge US inventories, with Mr Hightower forecasting a price low at $3.60-3.85 a bushel.

March corn was 0.2% higher at $4.28 ¼ a bushel, fighting a battle to stay ahead of its 10-day and 50-day moving averages.

US weekly export sales data later are expected at 550,000-750,000 tonnes.

'Oversupply in the market'

Among soft commodities, raw sugar, which like wheat closed the last session at its lowest since 2010, managed some bounce, up 0.4% at 14.81 cents a pound on New York's ICE market, but was this only profit-taking on short positions?

Phillip Futures restated a "bearish" outlook on sugar, based on both technical factors and an idea that prices will continue "to be pressured on the oversupply in the market".

CBA's Luke Mathews said that "in addition to the comfortable supply situation, currency movements continue to have a significant impact on ICE sugar futures", and in particular, the weakness in the real, with Brazil being the top sugar producer and exporter.

"Over the past fortnight ICE sugar prices have fallen 4 5% in dollar terms but are largely flat in real terms."

Evening markets: sugar, wheat futures hit three-year lows
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